Swing trading with Butterflies

Global OptionsTrades said:
I realised that one piece of my response to @trade4succes wasn't put particularly well and needs unpacking a bit as the directional swing trades can employ different strategies/structures.

The OtM Credit and Debit spreads are more dependent on theta decay, and less dependent on the IV falling for legs relatively close together.

The AtM/ItM Debit spreads and the AtM/OtM Credit spreads both utilise a short 50-delta leg, so benefit to a significantly greater extent on the reduction of IV to close in profit.

Obviously in the case of the Debits, the combination of increasing delta of the long leg (and intrinsic value in the spread) with reduction of IV of the short leg (and extrinsic value in the spread) (are expected to) work together to provide what I consider to be pretty good returns.

In the case of the Credit spreads, reduction of IV of the short leg (and extrinsic value in the spread) with theta decay on both are driving returns.

Hope this helps.
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Yes, that makes sense reading it explicitly like so. Thanks.
 
Added a couple of trades yesterday and today to take advantage of any fall in price and/or rise in vol.

Trade date: 16 November 2022
Security: VIX
Price at opening: 24.4
Structure: OtM Put Credit Spread
Expiry date: 23 November 2022
Strikes: 23 / 24
Opening Spread: 0.32

Trade date: 17 November 2022
Security: ES
Price at opening: 3,956.0
Structure: AtM/OtM Call Credit Spread
Expiry date: 23 November 2022
Strikes: 3965 / 4010
Opening Spread: 19.00

Trade date: 17 November 2022
Security: NQ
Price at opening: 11,752.0
Structure: OtM Call Credit Spread
Expiry date: 23 November 2022
Strikes: 12020 / 12080
Opening Spread: 13.75

Trade date: 17 November 2022
Security: RUT
Price at opening: 1,837.0
Structure: ItM/AtM Put Debit Spread
Expiry date: 25 November 2022
Strikes: 1835 / 1860
Opening Spread: 13.90
 
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Short directional position on oil filled late yesterday, and closing orders filled early today.

Trade date: 17 November 2022
Security: CL
Price at opening: 83.43
Structure: OtM Call Credit Spread
Expiry date: 25 November 2022
Strikes: 85.25 / 86.25
Opening Spread: 0.21
Close date: 18 November 2022
Trade duration: 1
Closing spread: 0.05
Profit / (Loss): 0.16
Profit / (Loss): 20.3%
 
This is not my actual equity curve, but as the journal has progressed I have accumulated sufficient trades to refine a statistically more-reliable sample for calculation of position size using Kelly Criterion.

Rebasing my actual historic trading performance per the current understanding of position sizes for each strategy provides the following equity curve for YTD, which is quite encouraging for the future.

upload_2022-11-19_13-34-50.png


This shows that lots of the flies at the beginning of the year were not contributing as much - and so receive low capital allocation - as the directional stuff that I started trading in the middle of the year. The hindsight should help as it will directly drive future performance.
 
The Nasdaq short Call Spread (#312) closed earlier today in profit.

Trade date: 17 November 2022
Security: NQ
Price at opening: 11,752.00
Structure: OtM Call Credit Spread
Expiry date: 23 November 2022
Strikes: 12020 / 12080
Opening Spread: 13.75
Close date: 21 November 2022
Trade duration: 4
Closing spread: 5.00
Profit / (Loss): 8.75
Profit / (Loss): 18.9%
 
Global OptionsTrades said:
This is not my actual equity curve, but as the journal has progressed I have accumulated sufficient trades to refine a statistically more-reliable sample for calculation of position size using Kelly Criterion.

Rebasing my actual historic trading performance per the current understanding of position sizes for each strategy provides the following equity curve for YTD, which is quite encouraging for the future.

View attachment 299776

This shows that lots of the flies at the beginning of the year were not contributing as much - and so receive low capital allocation - as the directional stuff that I started trading in the middle of the year. The hindsight should help as it will directly drive future performance.
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I like the study, but it may not be indicative of future results as what you did for your delta views might work in this environment and not in a future environment.

To earn 380% trading flies though, how much per trade are you risking on average? (total premium/account size)
 
I completely agree that history (across only 11 months in this case) may not be repeated in future, and expect that as market conditions inevitably change I may need to revisit my methodology. I backtest 1000 trading sessions daily, so am comfortable with performance through Covid, but not sufficiently arrogant to suggest that I have a universal edge.

You may have flattered my trading performance a bit; its significantly less than 380%! Also favoured structure has moved away from flies to verticals recently - only one fly traded during November (and no calendars) vs 12 verticals. Value at Risk (so premium paid for the debit trades and spread less premium received for the credit trades) is currently between 1% and 14% of account balance allocated depending on structure employed.
 
1-14percent per week…

covid periodp

Global OptionsTrades said:
I completely agree that history (across only 11 months in this case) may not be repeated in future, and expect that as market conditions inevitably change I may need to revisit my methodology. I backtest 1000 trading sessions daily, so am comfortable with performance through Covid, but not sufficiently arrogant to suggest that I have a universal edge.

You may have flattered my trading performance a bit; its significantly less than 380%! Also favoured structure has moved away from flies to verticals recently - only one fly traded during November (and no calendars) vs 12 verticals. Value at Risk (so premium paid for the debit trades and spread less premium received for the credit trades) is currently between 1% and 14% of account balance allocated depending on structure employed.
More...
 
Remaining positions from #312 closed with three losses.

Trade date: 16 November 2022
Security: VIX
Price at opening: 24.40
Structure: OtM Put Credit Spread
Expiry date: 23 November 2022
Strikes: 23 / 24
Opening Spread: 0.32
Close date: 21 November 2022
Trade duration: 5
Closing spread: 0.62
Profit / (Loss): -0.30
Profit / (Loss): -44.1%

Trade date: 17 November 2022
Security: ES
Price at opening: 3,956.00
Structure: AtM/OtM Call Credit Spread
Expiry date: 23 November 2022
Strikes: 3965 / 4010
Opening Spread: 19.00
Close date: 23 November 2022
Trade duration: 6
Closing spread: 34.00
Profit / (Loss): -15.00
Profit / (Loss): -57.7%

Trade date: 17 November 2022
Security: RUT
Price at opening: 1,837.00
Structure: ItM/AtM Put Debit Spread
Expiry date: 25 November 2022
Strikes: 1835 / 1860
Opening Spread: 13.90
Close date: 23 November 2022
Trade duration: 6
Closing spread: 7.20
Profit / (Loss): -6.70
Profit / (Loss): -48.2%
 
Opened long swing positions for expiry next week.

Trade date: 23 November 2022
Security: ES
Price at opening: 4,012.00
Structure: AtM/OtM Put Credit Spread
Expiry date: 28 November 2022
Strikes: 3985 / 4015
Opening Spread: 11.25

Trade date: 23 November 2022
Security: RUT
Price at opening: 1,861.00
Structure: ItM/AtM Call Debit Spread
Expiry date: 30 November 2022
Strikes: 1830 / 1860
Opening Spread: 18.96

Trade date: 23 November 2022
Security: CL
Price at opening: 78.30
Structure: OtM Put Credit Spread
Expiry date: 02 December 2022
Strikes: 72.5 / 74
Opening Spread: 0.32
 
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